The International Sustainability Standards Board (ISSB) was divided on whether the use of the word 'significant' in IFRS S1 could be confused with the concept of materiality.
The IFRS staff had suggested that the board remove the use of 'significant' and 'all significant', as respondents to the consultation said that the term lacked a clear definition and that, in many cases, there was a lack of clarity in distinction between what is material and what is significant.
Co-vice-chair Sue Lloyd said that, in drafting the standards, the staff had been very careful in using both words in different places.
"We routinely, in both S1 and S2, used the word 'significant' when we're really asking people to decide which matters and topics to provide information about and then we use the word 'material' once you've decided what matters to report on, to decide which pieces of information were so important that investors needed to have them," she explained. "We were very careful and structured and systematic in our use of those two words in the document but we failed to communicate on that."
For her, deleting 'significant' and only using 'material' missed the point that companies have to go through a process thinking of the whole spectrum of sustainability related risks and opportunities before narrowing down what is reported.
Board member, Veronika Pountcheva, echoed Lloyd's feeling by saying: "For me 'significant' is the process and 'material' is the outcome."
But other board members said they struggled to see a difference. Richard Barker argued that "an investor when thinking of what is significant, would automatically think of something that is material".
Chair, Emmanuel Faber, also felt the standards could do without the word 'significant' but he was more skeptical of removing the word 'all' [sustainability related risks and opportunities].
After lengthy discussion, Lloyd found a potential path of consensus. She asked if the board would agree to ask the staff to work on removing the word 'significant' throughout the document, not to use a substitute, and to put the emphasis on the word 'material'. Additionally, the staff should look at an explanation of the process to provide guidance for companies on how they approach this assessment in a way that lands on material information. The staff should consider further whether the word 'all' should be used.
The board voted unanimously, although some board members hinted at the need for further discussions to be held privately.